The banking regulator said the bank had ceased to be solvent and all efforts to revive it has failed.

The cooperative bank has accepted its precarious financial position and attributed this to the fraud amounting to Rs 1200 crore committed on the co-operative bank by share-broker Ketan Parekh and his associates in collusion with the then members of the bank board.

In March 2001, there was a sudden run on the co-operative bank following rumours of its large exposure to Ketan Parekh, who suffered huge losses in his share dealings. The co-operative bank was also holding substantial amount Rs 800 crore of inter-bank deposits from a large number of urban cooperative banks in Gujarat and from other banks. This posed a systemic risk for the co-operative banks in Gujarat.

A statutory inspection by RBI with reference to its financial position as on March 31, 2011 revealed that the co-operative bank's assessed net worth was a negative Rs 1316.50 crore, capital adequacy ratio was (-) 1941%, gross non performing assets were Rs 1126.55 crore, i.e. almost 99.99% of its gross advances, accumulated losses were Rs 1357.41 crore and deposit erosion was 100%.